Bloomberg News

Gold May Decline as Rally to Two-Week High Spurs Investor Sales

February 22, 2012

Feb. 22 (Bloomberg) -- Gold may decline for the first time in three days in London as some investors sell the metal after a climb to a two-week high. Platinum reached a five-month high.

Gold gained 1.4 percent yesterday, the most in two weeks, after the Greek government won a second bailout, boosting demand for commodities. The euro was little changed versus the dollar after Greece sent debt-swap and austerity measures to parliament for approval.

“We rallied too fast and caught a lot of people off guard, and these are good profit-taking levels,” Bernard Sin, head of currency and metal trading at bullion refiner MKS Finance SA in Geneva, said today by phone. “People are still looking to buy on the dips. The market is still very concerned” about Europe, he said.

Bullion for immediate delivery declined 0.2 percent to $1,755.98 an ounce by 9:54 a.m. in London. Prices reached $1,760.35, the highest since Feb. 3. Gold for April delivery was little changed at $1,757.50 on the Comex in New York.

Gold prices are up 12 percent this year after a 10 percent increase in 2011, an 11th consecutive annual gain. Holdings in bullion-backed exchange-traded products rose 1.4 metric tons to 2,390 tons yesterday, within 0.2 percent of December’s record, data compiled by Bloomberg show.

Euro-area finance ministers awarded 130 billion euros ($172 billion) in aid to Greece and reached an accord for greater debt relief from investor representatives in an exchange offer to tide the nation past a bond redemption next month. Greece’s government agreed to fiscal measures, a voluntary debt swap known as private-sector involvement, and collective action clauses for bonds.

Gold Seen at $1,940

Goldman Sachs Group Inc. maintained a forecast for gold to reach $1,940 in 12 months as it cut its prediction for commodity returns to 12 percent from 15 percent after prices rallied this year, analysts led by Jeff Currie said in an e-mailed report today.

Silver for immediate delivery fell 0.6 percent to $34.11 an ounce after ETP holdings dropped 13.4 tons to 17,587.5 tons. It’s the best-performing precious metal this year, up 22 percent.

Palladium was little changed at $709.88 an ounce. Platinum was 0.4 percent higher at $1,693 an ounce after reaching $1,709.75, the highest level since Sept. 22. Both metals closed above their 200-day moving average yesterday.

Impala Platinum Holdings Ltd. rehired 8,105 workers at its Rustenburg mine as of Feb. 21, after firing 17,200 following an illegal strike that resulted in lost production of 80,000 ounces of platinum. A conference room at the shaft 7A was burnt down early today, Sam Tselenyane, a warrant officer, said.

“From a supply point of view, platinum has been deserving of its recent rally given the to-date loss,” Edel Tully, an analyst at UBS AG in London, wrote in a report today. “Although still very volatile, it does appear that the situation is closer to a resolution than not. Therefore, in our view platinum prices are not deserving of taking on a further South African premium.”

--With assistance from Phoebe Sedgman in Melbourne. Editors: Sharon Lindores, John Deane

To contact the reporters for this story: Nicholas Larkin in London at nlarkin1@bloomberg.net;

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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